Thursday, November 11, 2010

Fiscal Commission Not-Report

There's a lot to like. There are also a couple big things that I absolutely hate. I'm going off the summary from TPM. I should note that this is NOT the report, merely a draft by the Chairmen to get the party started. Also, these are scattered thoughts, not a particularly cohesive (or well-written) conclusion.

Defense Cuts. Not as deep as I would like, but killing the F-35B and V-22 Osprey are both great moves. (Sorry, Marines, I know it's your birthday.) I have a hard time finding fault with the cuts, though I think they could have looked closer at the Navy. I'm also not sold on some of the pay freezes/cuts to soldiers. I think it would be more effective to fire more contractors and get soldiers to do their jobs. We pay a hell of a lot more for contractors than for our own troops.

Tax reform. Awesome. I would leave the EITC and ditch the rest. Unlike Ross Douthat, I dislike social engineering in the tax code, so the child tax credit isn't something I'm interested in saving. Killing the exemptions for mortgage interest, health insurance, and a crapton of other things is exactly in line with what I have advocated. I'm not a huge fan of their more extreme version flattening the tax code. Sure, eliminating tax expenditures means marginal rates can go down, but without the EITC this would amount to a tax increase on the poor, and either a tax cut or business as usual for the rich. Keeping the EITC would help with that. Upping the gas tax is a good idea, though I would prefer a straight carbon tax. The cap on tax revenue at 21% of GDP is a statement about size of government and not about the deficit. It should not be included. Have we not yet learned that reducing revenue doesn't reduce spending? Revenue should be adjusted to fit the appropriate level of spending. Picking arbitrary numbers is not the way to go.

Further cuts in Medicare. Not hugely convinced that they do a lot more than move the burden of payment slightly away from government and toward out of pocket expenditures, but it's better than nothing. Probably not enough to really take down the problem completely, but they seem to be relying on the IPAB for that.

Means-testing Social Security. I've called for this several times, so obviously I'm a fan. I'm not a fan, however, of raising the retirement age. I think further raising the cap on payroll taxes while leaving the retirement age where it is would be a better idea. I don't yet know what to think about changing the indexing of benefits from wages to inflation. The CBPP thinks it's a rather bad idea. But it does make sense to index it to prices, rather than wages, as the point of Social Security is to keep seniors out of poverty, not to be an actual pension. I'm not convinced that "seniors will get less than they otherwise would" is a valid reason to oppose this change. If it means benefits will drop to the point where they're no longer keeping seniors out of poverty, then I might object.

Other discretionary spending cuts. Eliminating earmarks, haha, ok, whatever, that won't change the deficit at all. Killing the Corporation for Public Broadcasting is fine, NPR will live on with ease. I'm very glad to see farm subsidies on here, they need to go. The generic cuts to public worker compensation and public jobs are a joke. Tell me what jobs and how compensation will change, then I'll get back to you. That's just a sop to the right. I do not agree with cutting funding for the State Department. If anything, some of that money saved at the DoD should go to Foggy Bottom, since they're more important to our foreign policy than Defense really is. Secretary Clinton is bolstering our ranks of FSOs in USAID and State, and that process should continue, as it is very important to our economic and military security.

Conclusion. If I had to give the package an up or down vote, I would vote for it. While much of it seems to have been written in the halls of AEI (or the less militant parts of Cato), many of the cuts are progressive. It seems to have been modeled after the austerity programs in the UK in many ways. The most regressive part is the raising of the retirement age and that's what I like the least. But I would choke that down in order to make all the other changes in the package.

It's too bad this package doesn't have a chance, because it would be a good start.


  1. I agree that the chairmen's proposal is pretty impressive in terms of its seriousness. Obviously, if any of us were the chairs, we might have tackled things somewhat differently in terms how of much to increase taxes versus how much to cut spending. But the point is that this document is quite serious about what it will take to tackle the deficit (and long term, the debt).

    I was pretty disappointed to see that a number of Democrats immediately proclaimed that they found parts of the proposal so toxic that they would never vote for it. The Republicans aren't jumping in favor of it either, but there seems to be more animus from the left side of the aisle.

    I'll just self-servingly note that this further reinforces my belief that both national political parties suck and that I'm glad I belong to neither one.

  2. See, now if we had Ranked Choice Voting, your non-partisan-ness might actually have an outlet. Instead you get to do silly things like root for divided government. :P

  3. I'm totally in favor of ranked voting. People like me are the ones most effectively disenfranchised by our current system of (mostly) closed primaries that produce relatively extreme candidates.

    For what it's worth, I'd basically tell the political parties, "Pay for your own damn primaries for the purpose of identifying the 'official' Democratic and Republican nominees, but the one election that taxpayers pay for will be the general election with ranked voting."

    Historically, the "white primaries" were the reason that the Court made primaries public rather than private. But I think we've moved beyond that, so I don't see why taxpayers should pay for partisan party primaries.

  4. Weirdly, right now Minnesota has both. I really need to hit the hay right now, but this section of the Wikipedia article shows how the Minnesota DFL picked a candidate who then lost in the primary to a far better funded candidate with better name recognition.,_2010#Democratic-Farmer-Labor_Party

    Kinda interesting. We already have precinct caucuses and state nominating conventions in place, but the primaries then happen afterward and can override all the previous work.

  5. A couple of comments on the Social Security section of the report.

    As I understand it, the Simpson/Bowles report is suggesting changing the COLA computation from reflecting an increase in wages (as it currently does) to an increase in prices. This has been proposed for at least 30 years, and I think it's a reasonable change. I don't see where the report is proposing changing the indexing of the initial, basic benefit computation from "wage indexing" to "price indexing", which is the subject of the CBPP link you provide. But maybe I'm missing something.

    The report does suggest adding a "bend point" to the basic computation, to further reduce benefits payable to high wage earners.

    I'm not sure what you mean by "means testing." To me it means the size of your Social Security check would depend on how much other income/resources you have at the time you're receiving benefits. Presumably, you would get no check unless you "needed" it. Examples of means tested programs are TANF and Supplemental Security Income.

    I'm against means-testing because:

    * the administrative costs are enormous, resulting in benefits which could have gone back to the taxpayers actually going to pay more people who have to determine whether each beneficiary "needs" a check.

    * the benefit computation is already progressive. A low wage worker receives a proportionately higher return on his Social Security taxes than does a high wage worker.

    * the benefits of relatively higher income retirees is taxed, with the income from that tax going back to the Social Security trust funds.

    * it would stigmatize a Social Security check. Instead of something you worked for and paid for, it would become something you got because you are poor.

    * and for that reason, it's a Trojan horse for the folks who want to do away with it completely. Stigmatize it, and watch public support evaporate.

  6. Correction: third bullet (*). Benefits ... ARE taxed. How embarrassing.

  7. Your first comment got marked as spam. Apparently blogger doesn't care about social security very much.

    As for your point about means-testing. I think making the formulas more steeply progressive would be a good way to means-test without actually having to determine which people need a check and which don't.

    I have worried about the stigma, but in order to keep everything in the black, I think it's better than raising the retirement age or cutting benefits across the board, which would hurt the working poor the most.

    Unlike programs like TANF, Social Security, even in a pared down form, has the AARP willing to go to bat for it. That's a huge advantage that most programs targeted at the poor do not have.